Gas Prices Creep Downward: Will the Trend Continue?

The average price of regular gasoline in the U.S. fell slightly in the past week, to about a half-cent below the $3.96-per-gallon price of last Monday, according to the American Automobile Association. The price decrease comes after a largely steady runup dating back to late last year.

While some analysts had predicted prices would climb closer to $5 per gallon, the current slowdown supports others who have long said $4 remains a ceiling for consumers – a point at which demand for fuel drops off precipitously. Indeed, gas prices have been bumping against that virtual ceiling in many regions and now appear to be declining.

But is the downward move the beginning of a trend or just a brief pause before another sustained rise?

I think it is safe to say gas prices are not going to soar beyond the $4 mark anytime soon. Consumers so far have been willing to cut their fuel consumption, thus reducing demand at the pumps. The pull-back by drivers is a bit like what happened during the summer of 2008 when gas prices spiked and motorists seemed to simply stop driving. The difference this time is that prices began to rise earlier in the year and the buildup was more gradual.

Consumers have had more time this year to plan strategies for saving fuel by changing their driving patterns. In many cases the last fuel spike may have convinced drivers they can get by despite high prices. Here are five easy tips for getting the most from a tank of gas:

Scout around for the best deal. Prices can vary five or 10 cents per gallon from one neighborhood to the next.

Pay cash. Some stations charge 10 cents or more extra per gallon if you pay with plastic. It adds up.

Keep your car in tune.

Check often to make sure your tires are properly inflated.

String errands together into one trip and pick a route that minimizes your total distance traveled.

Comments (5 of 7)

Be all that as it may, we always have the option to buy, or not to buy. Feel strongly enough about the inelasticity of the price of gas? Then stop buying it. Make a political statement. Walk. Ride a bike. Hop a bus. Take a taxi. My preference is to drive. So I choose to buy the gas just like the millions of Americans who don't care what gas costs because they choose the convenience of driving. With the world-wide demand for oil continuing to rise, and the US government unwilling to further develop its own oil and natural resources, the price of oil will continue to rise. No sense in whining. It's going to happen. Get used to it.

9:52 am May 17, 2011

AnotherView wrote :

Everyone it seems has their own favorite knothole to look through in order to explain the reasons why the price of gas is so "inelastic" in terms of the economic theory of supply and demand. My view and explanation is twofold in nature.

The first reason for inelastic behavior for the price of gas at the pump is a long-term one and really cannot be solved; it is because the market for gasoline is only a fraction, albeit a significant one, of the total market for oil. Simply stated, for many reasons, our developed societies heavily depend on petroleum products to function.

The second (and lesser) reason for the oddly appearing inelastic behavior of the price of gasoline is the consumer decision to purchase less or more depending on their economic circumstances. I submit that several million U.S. people out of work is playing havoc with the price of gasoline and that coupled with oil producers ability to throttle the production of oil, thereby limiting supply, has a partially unknown effect on what the demand for petroleum products will be. I agree with the author and others who intuitively believe and state that $4 per gallon gasoline is a real barrier and further I believe that oil suppliers have just been ascertaining this reality.

In closing, I cannot stress enough how complex the pricing of gasoline and other petroleum products and in turn all of the products that depend on petroleum products must be but it is surely not a simple one to explain or manipulate.

6:38 am May 17, 2011

RJM wrote :

And for people who drive a lot, the wholesale clubs gas prices are usually a good bit cheaper such that it pays for your membership and then some.

6:37 am May 17, 2011

RJM wrote :

In my state, Alabama, nobody charges less for cash.

And I use a 5% cashback card for all my gas purchases.

But, the best thing is just to drive less.

Small trips to the store are costly when you figure gas & wear & tear. (and wear & tear is worse on short trips)